I HOLD THIS TRUTH TO BE SELF-EVIDENT, THAT A DEBT CRISIS CANNOT BE RESOLVED WITH MORE DEBT

Thursday, February 12, 2009

Carbon Tax or Carbon Trading?

In discussing "green" energy the following question inevitably arises: should we tax "black" energy (coal, petroleum, gas, etc.) or should we instead install a cap-and-trade regime whereby emissions are capped at a given level and entities can trade pollution permits?

The main argument for taxation is simplicity, whereas for cap-and trade is the certainty of a pre-determined volume of emissions. The EU already operates an active emissions market, quite successfully at that. See below for a chart of futures prices for CO2 emissions (click to enlarge).

We can immediately see the Achilles heel of a market-based cap-and-trade system: as prices for CO2 permits drop - recently from 30 euro/ton to 8.85 euro/ton - industry can simply put off becoming greener until economic conditions improve. This regime, therefore, does not drive continuous greening but does so only on a marginal basis: pressure to change varies with economic activity, since most activity is still "black".

The answer to the tax or trade question is quite simple: both. Taxation, ideally steadily rising on a pre-determined basis, will constitute the constant pressure towards "greening", whereas the permit trading system will provide variable impetus for marginal profits. Think of polluting, in broad terms, as running a business that has both fixed and variable costs.

Now, couple the above with one more "missing link", the appropriate monetary system (see my recommendation for The Greenback), and we're off to the Green Races.

32 comments:

Debra
said...

Sorry, Hell, but I'm definitely not following you on this one.For the simple reason that YOU, being the one who introduced (to my great delight) the topic of indulgences are NOW advocating a system that smacks rankly of indulgences ?That's what I call having one's bottom between two chairs...No permits to pollute.No trading permits to pollute.It just indulges our fantasy that our little symbolic mindsets REALLY correspond to something in REALITY. And that is false.

I don't agree with you Hell.I think we need some theologians to oversee the implications of what we are doing here.And it is not because you use the word "external" that it makes it ok.I have certain fanatic tendencies that you are well aware of now.They do not make me a totally unreasonable person. I can listen to arguments and change my mind.I have already changed my mind often, as stated on this blog.But, what's at stake in this issue of language is really fundamental to me. And I will not compromise on IT.Cheers.

In honor of Darwin's birthday, I'm gonna disagree with both of you (debra and hell).

Hell... cap and trade, tax and greenback ARE nifty ideas, but they rest on some large assumptions. 1) that we have the time to implement them 2) that "tomorrow's" business practices will look like todays.

Personally, I believe change is happening too fast (amid a too un-responsive populace) for these to be viable solutions. And that in the medium term future, we're all going to be looking at a soviet style black market where any and all currency is worthless (because there's no one and nothing to stand behind the obligations)

and... (for Debra)

Grammar just happens to be a system of rules that we impose ON TOP of language so that it is logical and understandable. If it were the other way around there would be no exceptions or irregularities. For example, the word "think" would be "thinked" not "thought".

English is dominant NOT because it was derived from rules, but because it evolved over time and assimilated other languages as a response to its own deficiencies. "Beef" (for example) is a word we stole from French so that British aristocrats could feel superior to the peasants in their fields who ate the old english language product "cow".

So, YES. Language is powerful, but it is still subservient to larger cultural forces.

...

Now I"LL be dogmatic and say that the best way forward is to look at the cultural value systems which derive both language and economics.

and I'm gonna have to side with Dink (i think) and say that imposing STIFF penalties on individuals who break the social contract is the way forward. And doing something to destroy the TRUST of the social contract would necessitate the highest penalty.

"We can immediately see the Achilles heel of a market-based cap-and-trade system: as prices for CO2 permits drop - recently from 30 euro/ton to 8.85 euro/ton - industry can simply put off becoming greener until economic conditions improve.".

Err, well, at least THIS reader believes this is actually a great advantage of cap-and-trade: changes can be deferred until implementing them is 1) needed more, and 2) less likely to lead to compensatory layoffs of relatively innocent employees, and/or 3) less likely to lead to business failure to due increased costs when already on the brink due to economic stress.

Every so often I encounter anti-oil advocates and until they practice what they preach, they have no credibility.The costs associated with replacing asphalt roads with all concrete and the complete removal of plastics from all use is grossly impractical. And I will not remotely consider an electric vehicle for offroad access to my mining claim.Someone needs to crunch some numbers for the number of windmills and millions of acres for solar panels to generate the terawatts of power anticipated.

Cottonbloggin- I agree with your (DInk's) last point. I definitely concur with the Darwinian reference as well.

But what is the social contract?

There is a reason morality evolved in human primates (really all animal species) and that morals are partially genetically predetermined in all of us.

Which is more important to you, someone's desire to work only 20 hours a day and get a comfortable retirement, or someone's request for a second bone marrow transplant when the first one fails? Or someone's desire to have 14 children on public assistance as "all they ever wanted"? Does the relative age of these individuals change your opinion or their relative contributions to the collective? Or.... on and on and on?

As for the black market currency thing, it still seems to me that if everyone is in debt then no one is and nothing has fundamentally changed except attitudes towards labor.

The reason why you don't see me driving an electric car, is because the infrastructure isn't there yet. But that cannot prevent me from yelling for change at the top of my voice.

I don't see how this is an inconsistent stand. In the 1980s, they laughed that those who advocated Canadian tar sands for oil. Nowadays, there is no laughter. That change of attitude shows you exactly where we are with respect to oil.

global warming based on GHGs is a farce. Its only a MODEL! You cannot even remotely prove it. The Earth has had much much higher temps w/o human intervention. If there is ever a mini-ice age or a real one, you'll be begging for some GHGs - if one could prove that it does lead to warning.

These clowns can't predict the climate a year from now. Do you really think that their models can predict 100 years from now ? The smartest most well funded researchers blew up the world since the couldn't even model a mortgage market - and that's a million times less complex.

The leeches for public funding put in some factor about carbon and voila! you have warming, but its not even close to being proven, nor all the other processes. Again, they can't even predict the climate 1,5,or even 10 years from now - and yet you gullible imbeciles buy into it.

The Selfish Gene (Dawkins) is so mind-blowing for showing this. Its uncomfortable to believe our emotions are genetic manipulations honed over eras, but c'est la vie (literally). My vote is to keep morality and emotions around, but keep a close eye on them and use the cognitive override liberally.

"the "Bell Curve" wars of the 1990s, over race differences in intelligence, will seem genteel and short-lived compared to the coming arguments over ethnic differences in moralized traits. I predict that this "war" will break out between 2012 and 2017."

It will be interesting to see what the future holds for us on this issue as this fundamental truth sets in more and more with people.

Well, once again we divide the responses between the cynics (realists... behaviorists...geneticists, etc.) and those of us who say God save us from the Darwinism that has evolved since Darwin's death (and that he would have been as horrified at as Adam Smith would be to come back and see what has been made of his economic theories, I defy anyone to say the contrary here...)Sorry, Cotton, the reason why language is fundamental is that it is the motor, and the means of vehiculating all of our other symbolic systems. Freud knew this. Lacan too.Language is not just vocabulary, Cotton. You can't reduce it to that. Our syntactic systems determine the way our minds think. Cut to an article by Beneviste (don't know if it is available in English) which establishes that categories of thought mesh with categories of language (i.e., the subject of the phrase overlaps the question of the Subject in philosophy, for example.)As for imposing penalties, I am not a Christian, but I think that Jesus was one smart cookie.Penalites and punishment get you nowhere. Just more finger pointing.I'm talking about a REAL revolution in human kind.Like the revolution that Jesus Christ wanted to bring about.Now, that's revolution.LOVE, not PUNISHMENT as the incitement for social change.Hard to believe, right ?That's because we're all afraid, and that so many years of beating on ourselves through Darwinism, among other reductionists theories (and they ARE theories, because everything is theory, there is NO TRUTH...) have taken their toll.Next election, I'll stick Jesus on the ballot, my friends. (But no churches, please...)

Imagine a man who is genetically predisposed to alcoholism. He inherited a "selfish" gene which survived the ravages of Dawkin's evolution. But. Society doesn't look favorably on alcoholism so (sometimes) we send these individuals to AA.

This is where Dawkins selfish gene theory falls apart. It can NOT explain a "recovering" alcoholic. Saying he also had a sobriety gene at the same time is a circular argument.

The alcoholic is only able to recover because there is the POTENTIAL for individuals to overcome their genetic impulses (which are all chemical in nature) with "willpower".

Now... Dawkins would be correct to assume that our DNA sets the base condition for neurological function. I'll even let "selfish gene" evolution determine the placement of neurons in the brain and the original axon connections.

These base conditions (I call it the marred slate) are our instinctual programing and are chemically triggered events. So far, Darwin and Dawkins would be in complete agreement.

But Dawkins glosses over his idea of 'memes'. And that is his downfall. Turns out our neurological functions are plastic. We can "re-wire" our self over time and build new axon connections which has the possibility to override our genetic base condition.

In other words the alcoholic is able to re-wire himself to override his alcoholism gene (which will still be inherited). But he can only do so if he is properly educated, and if he remains in a social setting conducive to sobriety.

The social contract would be the minimum standards of neurological "re-wiring" which everyone must abide by... and if they don't, they are tossed out of society.

I think there are a few standards of best practice which almost everyone should be able to agree to. There are historical models which span the globe:

Confucious, Ghandi, Jesus, Socrates, MLKjr.

the reason I choose these five is because the "essence" of what each taught is the same:

Each taught NON-VIOLENCE in one form or another and is something that any STABLE society should be able to agree to.

Each preached a form of HONESTY (and I would add transparency), which is extremely valuable for any society looking to build trust (and all were assassinated for speaking truth to power... except Confucius).

Each upheld a form of deference to a larger COMMUNITY.

Each led a (more or less) documented life of INDIVIDUALITY within their respected society. I believe this is something everyone should strive for because it is thru individuality that people benefit society.

And lastly each had a form of the "golden rule" which I call EMPATHY... treat your neighbor like yourself... judge by content not skin color... justice... etc.

That forms the backbone of any social contract (which deals with INTERNAL social situations but not EXTERNAL), and is also (more or less) what the prisoner's dilemma and tit for tat prove is "mathematically" necessary for a stable society.

if the internal punishments were severe for breaking the contract (throw them into the wilderness), everyone would be enticed to look out for the greater good (while maintaining individual independence), and a "cap and trade / tax" system would be a common sense approach to the environmental commons...

CB said... "Saying he also had a sobriety gene at the same time is a circular argument."

You know as well as I we are loops, as are our genes... and some of us are more"loopy" than others ;-) .

I'll spare everyone more fractals mumbo jumbo but just think about this statement, I am not sure even you believe it at some level, at least from what I have read you say in the past.

You five choices seem fine. Jesus looked at it more from an individual's perspective, Confucius from the collective's- I am sure you have surmised I tend to fall a little more in the Confucian camp. But without criticizing your choices, I would point out your 5 choices still have inherently contradictory notions tied up in them and it is the cognitive dissonance at the boundary of these contradictions where most of us disagree.

If someone is an alcoholic, except for the empathy I truly do have for all the trouble it must cause them, AND both my personal willingness to help them out (to a point) and my professional obligation to do so, I really don't mind if they want to drink. It is only the consequences of their behavior on others I am concerned over (kind of a genotype vs. phenotype).

And my concern over any idea that is based on non-violence is while it sounds fine in theory, it is really fine as long as it works. But it has a high hurdle to overcome. Even Ghandi admitted non-violence probably would not have worked against Hitler. Certainly the followers of the religions you promote as models are guilty of committing violence all the time. And as I pointed out earlier, war is fractal. I haven't opened the paper today but I bet there is a 50-50 chance there is something on the front page about violence between Israelis and the Arabs.

And FWIW, I too have lot's of criticism of Dawkins.

@Debra who said... "and those of us who say God save us from the Darwinism that has evolved since Darwin's death"

Is this your idea? Pray to god for a solution? And a solution that will save us from what? Save us from the people who put food on our table? The people who DO NOT rob/rape/accost/harm/molest or otherwise bother us as we cross the street at 2 in the morning? The people who patch us when we are injured? The people who look for new solutions to our illnesses, etc...? The people who produce the labor to pay the taxes to make all these and much much more happen?

If these are the people we need saving from, I would be interested to see who you think we DO NOT need saving from?

And if your hero God doesn't save us from these 'evil' types, you go out and recommend to everyone else they start smoking to destroy the system for everyone else? Your values and mine are very different indeed. If they are at all representative of Europeans as a whole, Europe is in trouble indeed.

Ha, Thai, there you go taking me literally again.I've already written here that I do not believe in God.I have constructed my beliefs after much personal and spiritual anguish, and am quite happy with them. They resemble Deist thought. And I am a mystic. You don't have to believe in God to be a mystic, Thai... And you have not been reading me carefully enough if you have not figured that out by now.I also said, of course, that I was not Christian.I've been a psychoanalyst for a while now.I've read a lot of Freud, and some of Lacan.What really amazes me is just how EVEN psychoanalysts do not realize the implications of Freud's theories of language and the psyche on our capacity to create theories.And what theories are for. What motivates them.I maintain that almost all of the 20th century has seriously misunderstood Darwin's theories.That Darwin was a humanist.That what science based on Darwinism has become is VERY VERY far from humanist.And that, since language is EVERYTHING, our choice of words is everything.I can say in Freudian terms, a certain number of things that others say in behaviorist terms.But the fact that the "message" or "content" seems identical should not draw our attention away from the fact that if the words are different, then something else is different. And something else is happening. You can see that something else in the form and structure of Jesus' parables. In Hitler's propaganda. In Shakespeare's plays. Western society is obsessed with facts and explanations. It has almost destroyed poetry and philosophy. These are SERIOUS SERIOUS losses that we will pay for...We are already paying for them. And I see the evidence on this blog...

Those links were intense. I'm reeling. Did you look at the comments on the 2nd link? They're identifying specific alleles to specific emotional traits (leading to cognitive perception > philosophical beliefs> strategic decisioning> behavior towards other)! Sometimes it feels like humanity is so close to putting this giant puzzle together. But then a friend at Pfizer in SD e-mails that they're laying off a good % of the cancer researchers so I believe humanity is heading back into the Dark Ages. Plastic mood, no?

@ Cotton-

"the POTENTIAL for individuals to overcome their genetic impulses with "willpower".

Genes: The real Matrix. Red Pill!!

"I call it the marred slate"

Perfection

"Turns out our neurological functions are plastic"

Yes, its a programming marvel. Our adaptation is context-driven. The fact that much of this context is, um, downloaded (?) into our perception without conscious, cognitive oversight is disturbing. I'd prefer to evaluate and choose even if it means forgoing "righteous pleasure" (see Thai's 1st link).

Man, you people are on a roll with the provocative posts. Viva the intertubes!

Dink, we are so unbelievably arrogant...The nineteenth century was ALREADY advancing theories, and arguments like what you state in your comment...And just what have we really FOUND ?One bright point in your post that I saw was...downloading followed by a question mark.Ouf, as we say here. So you are not oblivious to HOW you are saying what you are saying...

I think it is time for me to start rereading Dune.

And, by the way, the dark ages were really not all that dark, you know. Depends on your point of view, doesn't it ?As for metaphor and poetry, Edwardo, thanks for sharing, but I think I prefer Emily Dickinson (who can be extremely concise and elliptical when she wants to...)

One last point that I find extremely important.One can perhaps argue that the "death" of God is not a great loss for humanity.But it seems to me that the arrogant destruction of God has led to something much more troubling : the rise of an unconscious, and sometimes conscious, fantasy that, having dispensed with God, we will also manage to control that great dance of life and dispense with death...Now, we will perhaps manage to dispense with death.But at a very very steep price that I, for one, am not willing to pay. We will dispense with death at the price of being human.And I will drop out of the (human) race at that point.I think that a lot of people, educated, and uneducated, sense this quite well. That this is a great part of the motor behind the reactionary movements in the U.S., and, incidentally, in the world these days.A generalist's point of view...

You haven't heard of the Enlightenment! One of the best fruits of your culture! Take it from this foreigner: your God (Christian or not) idea is useless. Billions of Chinese people can see right through its pretentions. You're fooling no one.

I am afraid I beg to differ. Cap and trade may be a nifty idea, but it is a system that is too easily gamed. Without a concrete system of check and balance, it is very easy for someone or organizations or countries to underdeclare or overdeclare their carbon footprint.

Sorry to be brutal, Debra, but the way things are going, the eagerness to be cool, the modern 'art' and the popularty of MTV (libertine) culture, now maybe in 200 years nobody will 'give a shit' about your OG D.There's a multitude of possible dystopian scenarios, and to avert disaster, who can say that no drastic actions (firing squads etc) would need to be taken?

As for your good homie the God, I think this concept has been rendered mostly obsolete by now. Hardly every thinking, educated fellow is willing to follow dogma like a sheep only because of some vague and childish promises of good old afterlife. I'd rather follow Hitler, in fact - he promised 'glory and good life here and now on the Earth, and the destruction of the greedy parasites'. Even in 'the old christian nations', the christian morale is obviously not working, and it's remnants are making matters only worse. If you follow good old christian rules of nice play (but that is if you think honesty, commitment and willpower is a monopoly of believers), and some other greedy guy doesn't, he gets the advantage, he is 'the winner' and maybe he pays for it - but you are the loser here and now. Society should reform it's 'rules of conduct', and I suspect for some time maybe some Hammurapi style laws would be needed to root out evildoers. Say, Madoff - what punishment he deserves for long-term, clearly fraudulent actions. Do you say 'but his clients were greedy, too, and we should forgive & feed him for years' or do you say 'have this creep hanged, for he will never change his ways'?

Debra- I know you are not religious. "God" was not my point at all. I am saying your agnostic 'mysticism' is no solution to our dilemmas either as far as I can tell, e.g. I don't see it replacing my cynicism any time soon- but then again I guess would being that I am such a cynic ;-)

I am not sure I understand your humanistic reference to old Charlie? For Charles was a 'sly' old fox if ever there was one, at a minimum egregiously dishonest with poor Wallace whom he discouraged from publishing the theory of evolution ahead of him. Indeed some people feel Charles was an outright plagiarist. The distinction in this truth will probably never been known.

And while I speaking with a frenchperson on the subject of genetics, I was wondering, do you know whatever became of this French program?

Homo Sarcasticus- doesn't that sort of seem to be the story of all of history? In order to make the world look like the ideal you want it to be, you need to turn it into a place you would rather not live "temporarily"?

How many people over the ages have decided it was necessary to "break a few eggs" in order to make earth look like the kingdom of heaven, etc...?

Edwardo, I sincerely apologize for taking a shot at you over your poetry. That was underhanded behavior.I didn't appreciate what I felt to be your contempt for Emily Dickinson. I suppose it would make it easier for me to appreciate you if I felt that you did not depreciate Emily Dickinson. Not liking her poetry is one thing. Depreciating her is another.Thai, the Wikipedia page on humanism discusses modern humanism, and is disputed. (At least the part I consulted, maybe I didn't read far enough) One can argue that humanism gets its first big push at the Renaissance, and those people certainly were not disqualifying God, Thai. Far from it. And you are probably right calling my shot on humanism. I am not a humanist, and I don't know that Darwin was, certainly not in the modern sense of the word.I don't understand your calling attention to Darwin's intellectual "dishonesty". (He was an ambitious man, like Sigmund Freud.)I don't care whether Charles Darwin was a plagiarist or not.Johann Sebastian Bach was certainly a plagiarist. And he even managed to plagiarize...himself on several different occasions. So what ? And I certainly did not vote for Nicholas Sarkozy last time around. Although the French national pasttime of dumping on their presidents manages to get on my nerves.And, last point, why the quotation marks around mystical ? Anyone have a problem with the word ?It is incredibly ho-hum to be the target of hysterical attacks (believe me in France it's worse) for daring to pronounce the word "God", or make reference to anything even remotely connected to religious thought. (Thank heavens, not from the regular readers of this blog.)

About Me

I was educated as a chemical engineer but spent almost my entire career in finance, particularly in money, FX and bond markets. The name stands for Hell-as-IOUs and the picture points to Quixotic endeavors.